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On the delegation of aid implementation to multilateral agencies

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  • Annen, Kurt
  • Knack, Stephen

Abstract

Some large multilateral agencies implement aid projects in a broad range of sectors, with aid disbursements showing a strong overlap with those of bilateral donors. Why do donors delegate sizable shares of their aid to large non-specialized agencies for implementation? This paper develops a game theoretic model to explain this puzzle. Donors delegate aid implementation to strengthen aid selectivity, incentivizing policy improvements in recipient countries, which in turn improves the development effectiveness of aid. Aid delegation is optimal for donors who disagree on the optimal distribution of aid precisely when an agency represents the average donor. In the model, non-selective bilateral aid can coexist with selective aid implemented by a multilateral agency funded by those same bilateral donors.

Suggested Citation

  • Annen, Kurt & Knack, Stephen, 2018. "On the delegation of aid implementation to multilateral agencies," Journal of Development Economics, Elsevier, vol. 133(C), pages 295-305.
    • Handle: RePEc:eee:deveco:v:133:y:2018:i:c:p:295-305
    DOI: 10.1016/j.jdeveco.2018.02.007
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    1. Knack, Stephen & Rogers, F. Halsey & Eubank, Nicholas, 2011. "Aid Quality and Donor Rankings," World Development, Elsevier, vol. 39(11), pages 1907-1917.
    2. Annen, Kurt & Strickland, Scott, 2017. "Global samaritans? Donor election cycles and the allocation of humanitarian aid," European Economic Review, Elsevier, vol. 96(C), pages 38-47.
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    5. Knack, Stephen & Rahman, Aminur, 2007. "Donor fragmentation and bureaucratic quality in aid recipients," Journal of Development Economics, Elsevier, vol. 83(1), pages 176-197, May.
    6. Kurt Annen & Luc Moers, 2017. "Donor Competition for Aid Impact, and Aid Fragmentation," The World Bank Economic Review, World Bank, vol. 31(3), pages 708-729.
    7. Alesina, Alberto & Dollar, David, 2000. "Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
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    Cited by:

    1. Annen, Kurt & Strickland, Scott, 2017. "Global samaritans? Donor election cycles and the allocation of humanitarian aid," European Economic Review, Elsevier, vol. 96(C), pages 38-47.
    2. Balázs Szent-Iványi & Bernhard Reinsberg & Simon Lightfoot, 2019. "Small Donors in World Politics: The Role of Trust Funds in the Foreign Aid Policies of Central and Eastern European Donors," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 31(3), pages 663-683, July.
    3. Nathalie Ferrière, 2020. "Donors and implementing agencies: a quantitative analysis of delegation and fragmentation in humanitarian aid [Donneurs et acteurs de terrain : une étude quantitative de la délégation et de la frag," Working Papers halshs-02479415, HAL.
    4. Axel Dreher & Jenny Simon & Justin Valasek, 2021. "Optimal decision rules in multilateral aid funds," The Review of International Organizations, Springer, vol. 16(3), pages 689-719, July.
    5. Samuel Brazys & Johan A. Elkink & Gina Kelly, 2017. "Bad neighbors? How co-located Chinese and World Bank development projects impact local corruption in Tanzania," The Review of International Organizations, Springer, vol. 12(2), pages 227-253, June.
    6. Philip Keefer & Christopher Kilby, 2021. "Introduction to the special issue: In memoriam Stephen Knack," The Review of International Organizations, Springer, vol. 16(3), pages 473-493, July.
    7. Dreher, Axel & Simon, Jenny & Valasek, Justin, 2018. "The Political Economy of Multilateral Aid Funds," CEPR Discussion Papers 13297, C.E.P.R. Discussion Papers.
    8. Bernhard Reinsberg & Centre for Business Research, 2018. "Blockchain Technology and the Governance of Foreign Aid," Working Papers wp505, Centre for Business Research, University of Cambridge.
    9. Silvia Marchesi & Tania Masi, 2021. "Delegation of implementation in project aid," The Review of International Organizations, Springer, vol. 16(3), pages 655-687, July.

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    More about this item

    Keywords

    Foreign aid; Trust funds; Aid selectivity; Multilateral agency;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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